The volume of mortgage approvals for house purchases – a leading indicator of completed house sales – fell for the third consecutive month in September, to 61,300. Approvals have now fallen by 20% from 76,500 in January 2014.
Home sales contracted for the seventh month in succession, falling to 97,450 in September – the lowest level since October 2013 (95,640). Sales in September were 11% below their recent in peak in February 2014 (109,530).
The report also found that house prices in the latest three months (August-October 2014) were 0.8% higher than in the previous three months (May-July 2014). This is the slowest quarterly rise since December 2012 when house prices grew by 0.7%. The sharp fall in the quarterly rate from 2.7% in September is largely explained by the 4.0% monthly rise in prices between April and May dropping out of the three-month-on-three month calculation. House prices fell by 0.4% between September and October. This is the fifth monthly decline in the past year.
Prices in the three months to October were 8.8% higher than in the same three months a year earlier. On this measure, annual house price growth has been slowing since the middle of summer after reaching a peak of 10.2% in July.
The index also saw signs of an improved balance between supply and demand. Market conditions, as measured by the ratio of house sales to the stock of unsold properties - reported by the Royal Institution of Chartered Surveyors’ monthly survey – eased for the second consecutive month in September as a result of lower sales, according to the latest data. This suggests that a better balance between supply and demand may be emerging.
Commenting, Martin Ellis, housing economist, said:
"House prices in the three months to October were 0.8% higher than in the preceding three months. This was the third consecutive decline in the quarterly rate of increase and the smallest rise since December 2012. Annual price growth in the three months to October slowed to 8.8% from 9.6% in September.
"Activity continues to decline with mortgage approvals in September falling for the third successive month to a 14 month low, whilst home sales are at their lowest level since October 2013. The associated weakening in demand has brought supply and demand into better balance.
“The economy is, however, continuing to grow at a healthy pace and employment is still rising. These factors should support housing demand over the coming months. However, while the chances of an imminent interest rate hike may have receded, a recent Halifax survey found that many borrowers are concerned about the impact a rise could have on their monthly mortgage repayments over the next 12 months. This concern is likely to curb buying intentions."
Jonathan Hopper, managing director of Garrington Property Finders, said:
"Most people are in agreement now that the market has cooled.
"The question is whether this is a long-term trend or simply a combination of the traditional seasonal slowdown and the market taking a short breather.
"If it's the later, we should see the market start to pick up in the New Year.
"Mortgage approvals continuing to fall is a worry though, but lenders are offering some great deals at the moment so this is likely to be as much to do with tougher lending conditions than buyers running for the hills.
"Saying that, buyers have become a lot more considered before making offers.
"They are not rushing in anymore and are viewing a number of properties before making a final decision.
"In London, it's noticeable that there's been a lot less sealed bid situations.
"The market does appear to be far more price sensitive now, and sellers are having to be more willing to negotiate to secure an offer.
"Overall, the market feels more stable and restrained. There is no suggestion that it's topped out and we're about to see prices plummeting.
"Consumer confidence remains high, and lenders are open for business with some fantastic fixed rate deals on the table.
"The market may well continue to cool until the end of the year.
"January and February should provide a better gauge of just what kind of health the property market is in.
"The one concern will be interest rate rises, and come the New Year, with the chance of a rate rise feeling a lot closer, this may start to play more on people's minds."
Alex Gosling, managing director of online estate agents housesimple.co.uk comments:
"After a long spell of balmy conditions, the first frost has come to the housing market.
"Yet buyer demand remains strong and lenders are engaging in a price war, pushing the cost of many mortgages to historic lows.
"A period of calm and consolidation in house prices would be no bad thing if it gave helps buyers focus on factors other than just the fear of being left behind by spiralling prices.
"Demand continues to be more broad-based too, with buyers putting in more sensible offers. As always, the best properties are still getting decent prices while overpriced properties are not selling.
"But mortgage approval levels are falling - and this is a worry. It's too early to say whether this is down to buyers stopping searching or simply that they are being made to think twice by tougher lending criteria.
"Uncertainty over when the inevitable interest rate rise will come is clearly playing on many would-be buyers' minds, and even if mortgage activity does kickstart, it's unlikely to reach the heights it has done over the past year.
"While it's too early to say if this is a pause or a plateau, the property market's fundamentals are strong and there's every chance that after the Christmas lull it will return to growth - albeit at a more sensible level than that seen this year."
